The Great Liquidation

America is hanging by a thread.   A great liquidation is underway, with many of the structures that support American society..or, in some cases, any viable society…being kicked away, sold off piecemeal, or just wantonly destroyed.   I’m talking about physical structures, legal structures, and social structures.

I do not think it is too late to turn this trend around, but the situation is very serious, and I’m going to ask you to gaze into the abyss with me before I discuss some reasons for hope.

Consider:

–Significant parts of America’s energy infrastructure are being destroyed or targeted for destruction.   For example, the Indian Point nuclear plant, serving NYC, was closed in April, despite the fact that this closure will likely create grid instability–and will certainly result in the zero-emissions power it had previously produced being generated instead by sources which do generate emissions. (Yet at the same time, NYC is banning the use of natural gas in new buildings–which will further increase the demand for electricity!) The Diablo Canyon nuclear plant, the largest source of electricity in California, is also scheduled for closure in 2025.   The cost of Diablo Canyon was $14.5B in present-day dollars, and I estimate that this represents at least 50,000 person-years of labor.   Something like 1200 working lifetimes, being wantonly trashed. Only a society which is very rich (for now)–disrespectful of its past accomplishments–and uncaring about the future would act in this way.

And these examples represent only a small portion of the assaults being conducted on America’s energy infrastructure. Peaker plants which ensure continued output under tough conditions, are being closed, with much hand-waving about how ‘demand management’ will solve any problems.   Oil and gas production are being squeezed. Pipeline construction is being suppressed, at the same time Putin is given the US green light for a Russia-Germany pipeline.  Energy is being transformed from an American asset into an American vulnerability.

–Billions of dollars of America military equipment were abandoned in Afghanistan and are now in the hands of the Taliban.   If we use a conservative estimate of $40 billion, that represents at least 400,000 person-years of human labor, thrown away. But that’s not the worst of it, of course: much of that equipment will now be used against us or our allies.   There are already reports of formerly-American weapons on their way to Iran.

The effect of the horribly-executed Afghanistan withdrawal on our credibility as an alliance partner will be devastating.   While many foreign policy types expressed worry about what expecting Germany to pay a larger % of the NATO bill would do to our alliances, any imagined impact of that was trivial compared with the impact of the current debacle.   The negative effect on American military recruiting, also, will be considerable, as discussed by several commenters at this blog.   Overall, America’s actual and perceived power position in the world has been greatly reduced over the past few months.

–American manufacturing has been negatively impacted by numerous policy choices and social factors, and America is no longer the world’s facto ry: that role now falls to China.   We have become extremely dependent on China and other countries for many products and components of products–as we found out during last year’s Covid crisis when we were subject to threats that we would ‘burn in the fire of Covid’ if China should choose to deny us critical pharmaceuticals and ingredients thereof.   We have become highly dependent on other countries for electronics manufacturing, especially microchips: a single Taiwanese company, TSMC, acts as the ‘foundry’ for a whole range of chips produced to the designs of many different American companies.   A Chinese takeover of Taiwan could be devastating to our industry, and such takeover appears considerably more likely than it did a couple of months ago.

Manufacturing was, for a couple of decades, considered by the approved-expert classes to be an increasingly-unimportant industry, populated only by those with inferior and uncreative minds. There is some recognition growing lately that this field may actually matter. But American politicians generally have so little comprehension of how the economy actually works that it is hard to believe that any remedies that they propose will be efficacious ones.   As example #1, I give you Joseph Biden: a man who asserted that anyone who can mine coal can ‘learn to code’, and who apparently believes that manually shoveling coal into furnaces is an actual substantial occupation in America today.   Biden also said, referring to China: “They’re not competition for us.”   This was in mid-2019!

America has given up much of its potential in manufacturing. and the consequences are severe for national security and for millions of people.    

–And, speaking of China: the United States has increasingly adopted a submissive position regarding to that country.   Major corporations are bending over backwards to avoid offending the leadership of that country…see my post here for some examples.   Universities, too, have become increasingly dependent on Chinese students and money.  At MIT, a board member of the McGovern Institute for Brain Research raised concerns about whether a certain research collaboration with China was appropriate on national security grounds…other board members took offense, and even said that any serious inquiry into the ambitions of the Chinese Communist Party would be “racist.” She was told to ‘stick to science’ and not to mention China again.

The situation is unpleasantly like what Churchill observed in the Britain of the late 1930s, where he wrote of “the unendurable..sense of our country falling into the power, into the orbit and influence of Nazi Germany, and of our existence becoming dependent upon their good will or pleasure”…A “policy of submission” would entail “restrictions” upon freedom of speech and the press. “Indeed, I hear it said sometimes now that we cannot allow the Nazi system of dictatorship to be criticized by ordinary, common English politicians.” (quote from William Manchester, The Last Lion)

At the same time that the Biden administration is pushing for total electrification of transportation, they seem to have little concern about the fact that the US is far from self-sufficient in the minerals required for electrification technologies–and Biden’s son Hunter has been involved in a deal to give China a strengthened position in the supply of cobalt, a key material needed for battery production.   We are being positioned for a return to the kind of extreme energy dependence on other nations that for years gave the OPEC nations so much power and hence contributed to Middle East instability.

America’s relative strength vis-a-vis China is under threat not only as measured by traditional military, economic, and geopolitical factors, but in terms of the influence of the CCP on American internal politics and affairs.

–Media, academia, and increasingly business, indeed the majority of institutions in our society…are being taken over by an obsession with race and ethnicities.   People are not seen as individuals, but rather as members of  ‘communities’, which term now refers to demographic categories.   Those who dare deviate from the political and social views assigned to members of their groups are denounced; see for example the attacks on the new Virginia Lt Governor Winsome Sears.

According to this 2018 survey, favorable race relations in the US peaked in 2009, with 66% of people rating them ‘good’…falling to only 26% assigning a ‘good’ evaluation in 2018.   A more recent Gallup poll shows that favorable views of race relations have fallen sharply over the past several years.

America’s colleges have been particularly race-obsessed:   see for example some college reading lists, with their assumption that ““diversity is defined by race or gender.” The link in the last sentence is from 2017…the obsession has clearly gotten much worse since then.

And it has gone way beyond colleges. “I’m so exhausted with being reduced to my race,” a girl at Grace Church School, an upscale private school in Manhattan  said. “The first step of antiracism is to racialize every single dimension of my identity.” Kindergarten students at Riverdale Country School in the Bronx are taught to identify their skin color by mixing paint colors. The lower school chief in an email last year instructed parents to avoid talk of colorblindness and “acknowledge racial differences.”  These cases are only one example of a much wider phenomenon.

If this sort of thing continues, then at best…at best…America becomes something like the Austro-Hungarian Empire, about which historian AJP Taylor wrote:

The appointment of every school teacher, of every railway porter, of every hospital doctor, of every tax-collector, was a signal for national struggle. Besides, private industry looked to the state for aid from tariffs and subsidies; these, in every country, produce ‘log-rolling,’ and nationalism offered an added lever with which to shift the logs. German industries demanded state aid to preserve their privileged position; Czech industries demanded state aid to redress the inequalities of the past. The first generation of national rivals had been the products of universities and fought for appointment at the highest professional level: their disputes concerned only a few hundred state jobs. The generation which followed them was the result of universal elementary education and fought for the trivial state employment which existed in every village; hence the more popular national conflicts at the turn of the century.

A creaky and dysfunctional society like Austria-Hungary is the best outcome for America if the race obsession continues on its current path…it is possible, even likely, that the actual outcome will be something much darker. Categorizing people by groups and defining them by the single dimension of membership in such groups is very, very dangerous.  I’m reminded of something Ralph Peters wrote:

“Man loves, men hate. While individual men and women can sustain feelings of love over a lifetime toward a parent or through decades toward a spouse, no significant group in human history has sustained an emotion that could honestly be characterized as love. Groups hate. And they hate well…Love is an introspective emotion, while hate is easily extroverted…We refuse to believe that the “civilized peoples of the Balkans could slaughter each other over an event that occurred over six hundred years ago. But they do. Hatred does not need a reason, only an excuse.”

Excuses for inter-group resentment are now being manufactured at high speed, even mass produced.  Really want to go there?

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Alternative Structure

I did note this story on Axios, which was discussed scathingly and at length on Ace of Spades; that the Lefty Progs have belatedly realized that, yes indeedy, us social and political conservatives are building our alternate establishments, in media, money-management, retail, and everywhere else. Welcome to the party, pal… It goes without saying that the Lefty Progs disapprove, most indignantly. I noted the split a little more than a year ago, in this post.

We’re already at the split. We read different books, watch different movies and television shows those of us who still watch movies and television follow different celebrities, earn a living in different ways, educate our children differently. We honor different things, different heroes and heroines, have wildly different aspirations and hopes for the future. We are already split.

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Jobs Without Workers

It’s well-known that there are currently a lot of jobs going begging, even as employers offer higher pay;   see for example this article.   Bernie Sanders offers his explanation: he suggests that the problem lies in the ratio of CEO pay growth to worker pay growth since 1978, and “Maybe the problem isn’t a so-called ‘worker shortage.’ Maybe — just maybe — the working class of this country has finally had enough.”

I don’t think Bernie Sanders has a whole lot of experience with this whole ‘working’ thing, so it seems unlikely that he really understands what is going on.

Not very common, I think, for someone to turn down a job because someone at a level stratospherically above him makes a whole lot more money than what he is being offered.   Do people really decide against a job at Wal-Mart because Doug McMillon got paid $20.9 million in 2020?   Or decide not to go workin’ on the CSX railroad because of James Foote’s compensation package of $15.3 million? While people are very concerned with comparative pay levels, they are usually most concerned about the pay of people doing comparable work or those one or two levels above them (or below them) organizationally.

So what are the factors that are actually keeping so many jobs from attracting workers?

One factor, I think, is simple inertia: people who have been out of the workforce for several months during Covid lockdowns may be delaying going back to work, even though they know they will need to eventually.   Another factor is the difficulties with child care / education…even when school are physically open, it’s hard to know how long it will be until they are locked down again, so you can’t count on them for a predictable schedule…and also, there are probably a fair number of people not very enthused about sending their kids back to public school at all, given what they’ve learned about them over the past year.

There are also people who are doing work off-books, and may find that by avoiding FICA and taxes…and any reduction in means-tested benefits…they can do better than they’d do at a full-time job.

Certainly one factor in reluctance to go back to work lies in the unnecessarily unpleasant nature of too many jobs…I’m not talking about jobs that, say, involve working in foundries in high temperatures or working outdoors on commercial fishing boats in winter, but rather retail and customer service jobs that feature extreme micromanagement plus schedules that change from week to week.   See Zeynep Ton’s book The Good Jobs Strategy for more on this point. (my review here)   And the enforcement of political correctness, also, makes quite a few workplaces unpleasant places to be.

And there is a feeling on the part of many people that they can’t get ahead, because of the importance of credentialism and contacts.   I’m sure there are a lot of people in low-level positions in banks who would make excellent branch managers, but are not considered for these jobs because they don’t have college degrees…also, branch managers who are not considered for region executive jobs because they don’t have MBAs, and people who do have MBAs who can’t break into investment banking because their MBA is not from a ‘top’ school.   The importance of credentialism varies widely by industry and by specific company within an industry, of course, I suspect many people think it’s more all-encompassing than it actually is, and this is demoralizing to them and creates a ‘why bother?’ mentality.

Finally, there is the problem of skill mismatch: the jobs that are open will often require skills that the potential applicants don’t have, even when unnecessary credential requirements are eliminated.   (Although one would think that the trend toward jobs that can be done remotely would mitigate this problem to a considerable extent, by broadening the geography from which people can be drawn)

What else?

Supply Chain and LTL

LTL means “less than load”. For those not in the know, a “load” means a full truck. Full trucks in the USA can be those huge 53 footers, or something smaller.

In industrial distribution for most products, we utilize LTL for the majority of our inventory. It’s a serious disaster right now.

I have been carping for the better part of a couple years about the issue. As with most things, there are several factors at play.

1) No new entries in the truck driving industry – we simply have a driver shortage, and have for a very long time. From what I am reading we are around eighty thousand short and the problem is only getting worse. All trades have this same issue. Kids growing up simply don’t want to do actual work, and would rather spend time making their money in front of screens or doing “soft labor” as I call it. Not that “soft labor” such as cutting hair or being an accountant are necessarily bad in and of themselves, mind you.

2) Nobody gives a f – this is harsh, but there it is. The work that is getting done, when it gets done in LTL is slow and sloppy. We have record amounts of damage and missing freight. It is absolutely maddening when you wait with these extended lead times for a specialized piece of equipment, and it finally arrives with a fork passed through the center.

3) I firmly believe that the cops, Teamsters and insurance companies have teamed up into a strange cabal to “slow roll” driverless vehicles. This is a bit of tinfoil had stuff I will admit but it is a theory I have had for a while. If we had driverless trucks a lot of these problems would be solved almost overnight, however there would be no speeding tickets to write, labor contracts to negotiate or premiums to collect. Well, virtually none anyways. This wouldn’t solve the issue of a lack of mechanics to service the vehicles, but that is grist for another post.

4) Lack of sense of urgency in government. As I have pounded the table on before, we need a “port team” or “transportation team” to get industry experts together, and start solving problems. Flying into LA and waving a magic wand over the ports, like has been done so far, is getting less than nothing done.

So the result is that we have this insane mess across the whole country. I have been trying to figure out ways to pick up freight that is within a reasonable range and trying other ideas such as even partnering with competitors or people outside of my industry to come up with a full truck to get a non stop delivery to the area.

A few anecdotal stories to end this rant.

I have a manufacturer that is 45 minutes from one of my stores. They sent out five pallets of stuff to me last Friday and it still isn’t here. The reason is that the trucking company has it parked at some sort of re-sorting facility as they lack drivers and need to consolidate their shipments. Meanwhile, people are getting cold.

This is an interesting article I spied the other day about a local chocolatier waiting forever for a skid of chocolate. I would bet a large amount of their extended lead time is transportation. It affects everything.

The Microprocessor is 50

Andy Kessler, writing in the WSJ, notes that the Intel 4004 microprocessor was introduced to the market on November 15, 1971.

Here’s a history of the project, and here’s an article which describes some of the related projects that were going on at other companies.

Busicom’s decision to give Intel the rights to sell the 4004 for non-calculator applications in exchange for a break on prices–rather than royalties or equity or warrants in Intel–has to rank as one of the most expensive business mistakes ever.